Options Earnings Series 1: What's Behind the Rise and Fall of Stock Prices After Earnings?
Welcome to the Moomoo Options Earnings Series!
This is Session 1 of our 3-part series designed to help you become more confident trading around earnings season:
What Moves Stock Prices After Earnings?
Option Buying and Selling Strategies for Earnings
Exploring Common Two-Legged Option Strategies for Earnings Season
After completing the full series, you should have a foundational understanding of how to identify potential opportunities and manage risk when stocks release earnings. Let’s dive into Session 1!
Options Earnings Series 1: What's Behind the Rise and Fall of Stock Prices After Earnings?
When a company reports its earnings, its stock price can go up or down quickly. But it's not just about whether the company made more or less money than expected. Three main factors often drive the price change:
1. Earnings Results
When a company reports earnings, investors compare the results to analyst estimates for earnings per share (EPS) and revenue. If results are better, it's a beat; if worse, it's a miss. For example, if the estimate is $2.00 per share and the company reports $2.10, that’s a beat. But if investors expected $2.50, they might still be disappointed, and the stock price could fall.
In sectors like technology or AI, revenue surprises can matter even more than earnings. A strong revenue (top-line) result often signals growing demand and customer interest, which may push the stock price higher.
2. Forward Guidance
What a company says about the future often matters more than what happened last quarter. This is called forward guidance.
If a company misses earnings but gives a strong outlook for next quarter, the stock might still go up. But if a company beats earnings yet warns about slower sales or higher costs ahead, the stock may fall.
3. Valuation
The stock price before the earnings report affects how much it can move. If the stock is already 'expensive', investors expect great results. So even a beat might not be enough to push the price higher, and the stock could even fall if the results don’t impress.
But if the stock is 'undervalued', even a small beat can lead to a strong rally. Investors may become more optimistic and start buying, which can drive the stock price up quickly.
Why Do Stocks React This Way?
Stocks generally move after earnings because of the difference between expectations and reality. Here are some common reactions:
Beat earnings + strong guidance + low valuation → Big price jump
Beat earnings + weak guidance + high valuation → Price drop or flat
Miss earnings + strong guidance + cheap stock → Stock might still rise
Meet expectations, but pre-earnings hype too high → Sell-the-news reaction
Investors are not just reacting to one number. They’re looking at the full picture from past results, future outlook to current stock price.
Case Study#1: Tesla Q3 2024 Earnings Result
In Q3 2024, Tesla (TSLA) missed earnings by over 15%. But the stock went up, not down. Why?
Tesla beat revenue expectations and gave a bullish forecast, including record Q4 vehicle deliveries, better margins, and growth in energy storage. Investors looked past the earnings miss and focused on the future.
In short, “Weak earnings (EPS) + Strong guidance = stock price rise”
Case Study#2: NVIDIA Q2 2024 Earnings Result
In contrast, NVIDIA (NVDA) beat both earnings and revenue in Q2 2024. Its AI and data center business showed strong growth.
However, management gave cautious guidance, warning about chip supply issues and enterprise demand uncertainty. Since the stock was already 'expensive', it barely moved after the report (only +0.10%).
In short, “Great results + cautious outlook + high valuation = flat stock price”
How to View Wall Street Consensus on Moomoo
EARNINGS RESULT: Where to find the Earnings Overview feature to assess miss or beat results?
From moomoo app, go to:
PAST and UPCOMING EARNINGS: Discover tab> Community> More > Earnings Hub Explore upcoming and past earnings releases with earnings calendar, and subscribe to notifications to stay informed.
EARNINGS BEAT/MISS: Markets Page> US tab> Earnings Beat > EPS/Revenue/EBIT
RECENT EARNINGS: Quotes page> Company> Tap Earnings Hub on the Financials tab
2. FORWARD GUIDANCE: Where to find the Conference Call or News details related to company foward guidance?
From moomoo app, go to:
Quotes page> Company> Tap Earnings Hub on the Financials tab> Earnings Call for Earnings Conference Call
Quotes page> Company> News or Announcements related to Earnings/Financial Results
Search for company name> Chart> Moomoo AI Daily/Weekly Brief (for latest key events)
3. VALUATION: Where to find the Analyst Ratings feature for a particular company?
From moomoo app, go to Stock Quotes Page> Company tab> Financial tab > Analyst Ratings
How do I get relevant information ahead of earnings release?
Consensus Rating: (Buy / Hold / Sell) from top analysts over the past three months.
Individual Analyst Ratings from each analyst
Target Price: high, low, and average projections for the next twelve months
Detailed Ratings: Each institution or analyst rating changes with success rate and average return for each analyst
Conclusion
Stock price movements after earnings are not random. They reflect how the actual results and guidance compare to what investors expected. By watching earnings, forward guidance, and valuation, you can better understand market reactions and make more informed decisions.
Disclaimer
The Analyst Ratings feature contains opinions from third-party providers and are obtained from what are considered reliable sources. However, its accuracy, completeness, and reliability cannot be guaranteed.Options trading is risky and not appropriate for everyone.
There is no guarantee or assurance that the use of any tools or data provided on the moomoo app will result in investment success or reduce investment risk.
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal.
Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services on Moomoo are offered by Moomoo Financial Inc., Member FINRA/SIPC.
In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC).
Read the Options Disclosure Document before considering trading. Options are complex and you may quickly lose the entire investment. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Customers should consider their investment objectives and risks carefully before investing in options. Supporting documentation for any claims will be furnished upon request.
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more
